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Risk Analysis for Commercial Mediators

Learn the higher math of risk analysis for commercial mediators. Discover how risk analysis creates objectivity, legitimacy, and a dispassionate approach, while addressing fear, uncertainty, and doubt. This training provides the tools to integrate and create symmetry of information, steady communication, and avoid reactive devaluation.

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Risk Analysis for Commercial Mediators

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  1. Commercial Division TrainingMay 27, 2009 / June 3, 2009Risk Analysis for Commercial Mediators Simeon H. Baum, Esq. Resolve Mediation Services, Inc. New York, NY (212) 355-6527 www.mediators.com

  2. The Higher Math of Risk Analysis

  3. Reasons to Try Risk Analysis • Creates feeling of objectivity & sense of legitimacy – not “me” • Neutral, logical, shared structure • Engenders dispassionate approach • Gives feeling of doability • Creates party Buy-In • Addresses/sparks the FUD Factor

  4. FUD FACTOR: FEAR UNCERTAINTY DOUBT

  5. More Reasons for Risk Analysis • Addresses varying views of probable outcomes • Is funnel for integrating and creating symmetry of information • Gives Agents something to Write Home about • Steadies Communication • Stills Reactive Devaluation

  6. What Is Risk Analysis? Remember Louis Nizer? Converting Probabilities to $#s (Expected Present Value)

  7. Probable Outcomes & Factors • Settle or Litigate • Win or Lose Summary Judgment • Discovery & Evidence • Win or Lose at Trial • Varying Damages • Appeal Risks • Collection Risks • Transaction & Opportunity Costs • Time Value of $ - interest/inflation

  8. DEFINITIONS Decision Node: Decision maker must choose which option to pursue. Chance Node: Decision maker has no control over the outcome. Lines emanating from the circle denote possible outcomes of an event, each bearing an associated probability (P) of occurrence. P for all branches emanating from a chance node must produce a sum of 1.0 (or 100%) Terminal Node is the point beyond which no activity is possible. It represents the consequence, payoff, or net value.

  9. DEFINITIONS, continued Expected Value is the mean of the possible outcomes in a situation with each outcome weighted by its likelihood of occurring. Sensitivity Analysis provides a means of assessing how the results of a decision tree are affected by variations in one or more of the uncertain quantities relevant to the decision. e.g., likelihood of winning & Expected Damages

  10. Disaggregation The spirit of decision analysis is divide and conquer: Decompose a complex problem into simpler problems; think straight, paste analyses together with logical glue, get program for action. Howard Raiffa

  11. Tao te Ching Think of the small as large And the few as many Confront the difficult while it is still easy; Accomplish a great task By a series of small acts

  12. Risk Analysis’s Detractors • It overlooks importance of Emotion, Values and Subjectivity (Kierkegaard: Concluding Unscientific Postscript To The Philosophical Fragments, 1846) • BIBO GIGO (bad in bad out) It is only as good as the information you gather and the assumptions you make • It is a Pseudo Science or at least an Irregular Science

  13. Working the #s

  14. The Art of Risk Analysis • Gather Information • Set the Right Tone • Develop Trust • Good Timing • Involve the Parties & Counsel • Do not Get Stuck • Consider Caucus/Joint Session • Couple with Transaction Cost Analysis

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